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FCA says older borrowers face advice and product gap

The FCA says many older mortgage borrowers struggle to get complete advice and cannot access a wide choice of products.

The regulator made the statement in an ‘occasional paper’, published today.

It suggests firms should take older borrowers into account more with their policies and proposition.

It adds that mortgage companies should also plan for consumer needs at different point in their lives.

Finally, the FCA recommends firms should be “considering potential innovation in product features or terms and supporting services to accommodate specific life events.”

However, the FCA says these issues are hard for individual firms to tackle, and also praised the mortgage trade bodies’ own research and “significant efforts” towards helping older borrowers.

Choice

The FCA says older borrowers often do not have enough choice of mortgage products and that lenders have a “limited appetite” for the loans.

It says: “This could be due to fewer local branches, fewer products offered by high street brands that meet their needs, or restrictions in lending criteria to older consumers.”

Lenders may also fear regulatory punishment when lending to older consumers.

This leads to issues with accessing suitable mortgage products, the FCA says.

The regulator also says its own rules may not help older borrowers.

There are also some regulatory barriers to innovation, such as the withdrawal of retirement interest-only mortgages, but that it is looking to bring these back.

Brokers

The FCA also says brokers have problems navigating products for older borrowers.

The regulator says “opaque or nuanced” criteria and complex affordability assessments make it hard for brokers to compare options.

This can lead to brokers only recommending a small number of products they are familiar with.

Lenders

The regulator also says lenders may not be clearly publishing information about upper age limits or acceptable sources of retirement income on their websites or literature.

The FCA says it is neutral about upper age limits in mortgage lending, though notes many lenders have increased this or removed it.

But it adds: “Although we have noted some progress in this area, consumer groups, firms and trade bodies report that increases to upper age limits will not be sufficient to facilitate lending to older borrowers.

“Firms may be unnecessarily limiting themselves, and older borrowers, by having rigid policies or systems and controls that are unable to consider individual circumstances, potentially resulting in unintended exclusion of credit-worthy consumers in the target market.”

Minefield

The regulator also reassured mortgage firms and trade bodies who feel that lending to older borrowers is a minefield and that the regulator may punish them for making mistakes.

The occasional paper says: “Our MCOB rules do not aim to discourage firms from lending to older borrowers, as long as they are credit-worthy. Decisions about lending strategy, identification of an appropriate target market, and application of any specific restrictions in lending policies are left to the discretion of individual firms.”

The regulator adds that it knows defining what ‘income’ is can be complicated for lenders catering to older borrowers.

It says lenders should take a common sense approach to this.

The FCA also says it will review its Handbook to make sure it is easy for firms to interpret, but that it needs to wait for Brexit first.

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It will be interesting to see how ‘vulnerable clients’ will be accommodated, changing financial situations accommodated, etc. Let’s face it. there is no chance that a funder will be able to design a product that can take a person from being a first-time buyer to when they are beyond retirement age. What is needed is a greater appreciation of the solutions that can be provided by different providers, with advise from the suitably qualified and knowledgeable advisers working in conjunctions with other specialists.

There needs to be greater co-operation between the financial adviser, lending adviser, legal adviser, care adviser, etc. Each adviser should contribute to the discussion, much in the way that a GP will work with the chemist, optician, chiropodist, hospital, etc.

The situation regarding the like of products and lenders, who accommodate older borrowers, has been around for far too long. Is lifetime lenders are prepared to allow a mortgage to be discharged on second death, why not traditional lenders. With many people aged 60 and over retiring with large pensions, why should these people have a cut off age Being prudent and perhaps ensuring that in a joint borrowers case, the Income in first death supports the Mortgage, why does a maximum age at expiry exists?

Although some of the bigger lenders have improved in this area, I personally think there is a long way to go and I am glad that the FCA are on to it.